Import ratio, in
economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
and
government finance
Public finance is the study of the role of the government in the economy. It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achiev ...
, is the ratio of total
imports
An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade.
In international trade, the importation and exportation of goods are limited ...
of a country to that country’s total
foreign exchange
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
(FX) reserves.
The
ratio
In mathematics, a ratio shows how many times one number contains another. For example, if there are eight oranges and six lemons in a bowl of fruit, then the ratio of oranges to lemons is eight to six (that is, 8:6, which is equivalent to the ...
can be inverted and is referred to as the reserves to imports ratio. This ratio divides a country's
average
In ordinary language, an average is a single number taken as representative of a list of numbers, usually the sum of the numbers divided by how many numbers are in the list (the arithmetic mean). For example, the average of the numbers 2, 3, 4, 7, ...
foreign exchange reserve by a country's average monthly level of imports.
[http://www.adelaide.edu.au/cies/papers/0302.pdf Exchange Rate Policy and Foreign Exchange Reserves Management in Indonesia in the Context of East Asian Monetary Regionalism]
Relation to sovereign risk
Credit restructuring is made more likely by a higher amount of imports relative to FX reserves. A
less developed country will pay for imports with its foreign exchange reserves. The more it imports, the faster these reserves are used up. Since satisfying a country's needs is considered more important than
repaying foreign
creditors
A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...
the more a country imports relative to its foreign exchange reserves the greater the
probability
Probability is the branch of mathematics concerning numerical descriptions of how likely an Event (probability theory), event is to occur, or how likely it is that a proposition is true. The probability of an event is a number between 0 and ...
of debt rescheduling.
References
{{DEFAULTSORT:Import Ratio
International macroeconomics
Financial ratios
Foreign exchange reserves
Import